Written by

The Tennessean

To some Green Hills residents, the mixed-used building Southern Land Co. plans at Hillsboro Pike and Richard Jones Road raises fears about more traffic and gridlock in an already busy area.

But to the Franklin-based developer’s CEO, Tim Downey, the project should help to meet pent-up demand for more variety in residential dwellings in one of Nashville’s wealthiest neighborhoods, along with office and retail space. He says Southern Land has a plan to address traffic and other issues, but many neighbors remain skeptical.

Downey, whose company started pursuing residential development projects here in the mid-90s before eventually moving its headquarters from Chattanooga to Franklin around 2002, spoke with Tennesseean growth and development writer Getahn Ward about the controversial Green Hills project, Southern Land’s business model and real estate trends.

What initially led to you and Southern Land Co. relocating from Chattanooga to Nashville?

We were forced to go to a bigger city because of air service and Chattanooga doesn’t really have any air service. And then, we were having a little trouble recruiting people to Chattanooga. When we started looking at our options around 2000, it wasn’t as attractive. Now it really is. Chattanooga has done a great job. Today, it is great, but air service is still an issue. We started looking at larger cities and Nashville’s just incredible and it’s hard to beat. We only do projects in major cities. So you’ve got great service to every major city, but it’s like living in Chattanooga. It’s just a great place to live. It’s safe, it’s easy to get around, and has all of the things big cities have — sports and restaurants — but you still feel like you’re living in a smaller city. So we’re glad to be here and we’re never leaving.

Southern Land initially became known in the Nashville area as a developer of subdivisions, such as Westhaven in Franklin. How did that focus change to mixed-used projects over time, and why?

My roots are in community development — building master-planned communities like Westhaven. But about 12 years ago, we expanded into apartment development. It was a good balance from an investment point of view to have both of those skills and platforms. They’re somewhat counter-cyclical to each other. They’re not doing well at the same time, so there’s a balance. What got us into apartments and commercial more than anything: we have this absolute passion for walkability and mix of uses.

When I was growing up, I lived in Detroit for a long time in a small community. I remember walking and riding my bike to the movies, the grocery store, the ice cream parlor. That was 40 years ago. It made life better and simpler and more enjoyable. I really had a passion for that that whole time. But it came out of favor so much in the’70s and ‘80s, because everybody got to where they didn’t want uses to be mixed together. I believe that was because architecture was so incompatible — like convenience stores were ugly. Now smart developers and developers who have multiple skills can make everything more compatible and make everything better. It just works that way.

Why did you settle on Green Hills for your next project, and why is it the ideal market for it?

We felt there was this incredible demand of people who want to live in the Green Hills area but don’t have access to another housing type other than large single-family homes. There’s so many unserved people, there’s a huge amount of empty nesters, single people, divorced people, widowed people, there’s families in transition that are either moving away and need a temporary place or moving to town. None of those people’s needs are being met. I had a person call that has a junior in high school. The husband took a job in Atlanta, but they want to stay and let the child finish school. But they don’t want to maintain their house. So they’re selling their house and wanted to move into a building. And then there was a lady that’s newly divorced that want to stay in the Green Hills area. She don’t want to move to downtown. That’s not her thing. Then, we’ve had several empty nesters that want to maintain a residence in Nashville. But maybe, like The Gulch is not their thing. They’re looking for something maybe quieter. I also had a man in his mid-’40s that’s never been married. He called to say he thinks it’s an ideal place to live and likes the idea of being able to walk to the mall, or walk to restaurants or wall to the bookstore. That’s a big one for him.

What drove your plans to also move your headquarters to that new Green Hills project?

About 50 percent of our employees live in Nashville. They love the idea of being here. They want to be able to walk to restaurants too. It’s everything I said, they believe in. And the ones of ours that live in Williamson County tend to live in northern Williamson County like Brentwood or Franklin. So it’s not too far for them either. We’ll occupy about a third of that 50,000 square feet of office space. The mix that we’ve done probably works the best for parking and compatibility. Office and residential share parking very well because they have different peak hours. Office needs like three to four spaces per 1,000 feet, residential needs like one to two. So if you put too much office, it upsets the parking balance. So, the way we’ve designed it, it fits perfectly with each other.

Where are you right now on financing, and how’s the market like for funding such deals?

We’re high equity, low debt. The way we do things, we don’t use a lot of debt. We’ve got debt and equity secured for this project. We had a lot of people gave us term sheets — six offers on the debt. We’re doing about 40 percent equity and 60 percent debt. Our equity partner is Redwood Capital.

What’s the plan to address concerns Green Hills neighbors have raised about congestion?

We’re trying to get word out to people so that they’ll understand that we’re improving the intersection so (much). There are seven curb cuts off of Hillsboro and Richard Jones Road — between the two. We’re cutting that down to two and we’re adding lanes. Here’s the problem with Green Hills. It’s not that there’s so much traffic — 31,000 cars a day for six lanes is a manageable load for that road. What the problem is – everywhere you go, there’s all these cuts where people can turn in or are trying to pull out. The more places on a road that you have people turning in and coming out, the more it slows traffic, right? You’ve been behind people, they don’t just turn into shopping centers, they tend to stop and then turn. Or they’re sticking their nose out, trying to get out. So curb cuts on this road are horrific. And then, the intersections are so narrow. So we’re widening Richard Jones and Hillsboro Road by donating right-a-way and working on a plan to build extra lanes. If they want to really improve traffic flow on Hillsboro Road, what they need to do, as Green Hills redevelops, they need developers to do what we’re doing — to give right-of-way, to improve intersections, to align intersections where possible and to eliminate curb-cuts. Somebody’s got to begin making these improvements. And when we’re done, we’ll actually improve traffic flow through there and other than the peak hour, which will be very minor impact, the rest of the time the traffic will actually flow faster through there than it does now – even after we’re there. We’re actually improving the traffic situation in the non-peak hours.

What do you see ahead for Green Hills in terms of how redevelopment might occur there?

Green Hills has obsolete buildings getting high rents because it’s such a popular area. For people to be motivated to redevelop those obsolete buildings and to make traffic improvements at the same time, buildings will have to be denser and taller and bigger. And our building will be appropriate to the context of a redeveloped Green Hills. We would certainly be interested in doing other projects, but we don’t have any other opportunities there at the moment. I think buildings will be generally taller. Very few will be as tall as ours because our building sits so far off the street. Height is appropriate to scale the further back you go. This is why the building being taller rather than longer is better. If we make the building shorter, but long like this. It would actually be more intrusive then making it narrower and taller. It’s further off the street this way, so it looks better. It’s further back. You block less view. So narrower and taller is much better than longer and wider and I’m not sure if everybody gets that: how much further off the street it is because we made (our building) narrower.

Where do you see the next boom in commercial development or the “next Cool Springs?”

The next Cool Springs, I think, is going to be Cool Springs for a while. There’s a lot of capacity still here, and it will only get better as it matures. You’ll get more and more restaurants, more things to do. It will be hard to compete with that. I do think the opportunity for Nashville to compete with Cool Springs is there though because Nashville has a lot to offer regarding great restaurants and locally owned restaurants, which people love. They could create more and more mixed-used within the city of Nashville like we’re doing at Green Hills, at Elliston (the mixed-used Elliston 23). We have a lot of restaurants at Elliston’s. Elliston’s walkable to lot of other restaurants. Nashville continuing to develop more mixed-used and more interesting places for people to live and work is its opportunity.

How did the downturn affect your plans for this area of Cool Springs including the land site across from your headquarters that has sat idled? What’s the plan for developing it?

It affected our partner Amstar. They were smart in being able to just bank the land as opposed to taking too much risk and trying to build something during the downturn. Now that things are better again, they’re starting to look at opportunities to begin developing again. Amstar is the main owner and controls it and they’ll make the decision. But I still own a portion of it. That’s a perfect place to develop a mix of uses. We could put a hotel, restaurants, office and we already have the residential.

With new office buildings such as One Franklin Park and millions of square feet more planned at Highwood’s Ovation project, do you see that affecting inventory in Cool Springs?

Demand will eventually be there, but it’s much better of an investment if you can do it sequentially and carefully and not try to force it — let the demand fill it. One thing I would like to brag on my competitors a little bit is they’re all trying to do some component of mixed-used where people aren’t driving as much. They’re trying to put retail and residential right on their sites. That’s the future. For us, we’ll do an office building only when it can be part of a mixed-use community where people can live, shop and work in one place.

What’s your strategy for targeting new markets for new residential and mixed-use projects?

We’re very careful about sites and we look in a lot of places. Because we so careful about where we build, we have to expand our search area a lot wider. We have projects in Denver, Philadelphia, Raleigh, Dallas. We’re trying to close on one in New York. We’re looking for places where people can live and work and walk to work, walk to restaurants. We’re trying to find those unique little spots where everything’s under their nose.

What does Southern Land pulling away from the apartment project you planned on property at 17th and Broadway say about that Midtown market?

We were a little worried about the amount of announcements (of apartment projects) in the area. It scared us. Construction costs and the pipeline. It will all eventually get absorbed, but we got scared that it was all coming online, all at the same time, and that started to worry us. It’s all announced, but some of them haven’t started yet. Maybe it’ll work out sequentially. That’s our hope. There’s a lot of people who want to move into these more urban, mixed-used environment. But if you bring it all on too fast, it’ll get overbuilt. Long-term, the demand is great and will be there. We just hope it kind of comes on methodically. We’re being careful about that right now. Green Hills has almost no supply, but Midtown has a lot of supply coming on. We’ve always been careful. That’s why we survived the recession so well. The only one really big office building we’ve ever done was successful in the worst of times. We’ll do more, but only when it can be part of a mixed-used environment. I’m scared to build a free-standing office that people don’t have a place to walk to because...it’s going to become obsolete.

What demographic changes are you seeing in the apartment market that’s driving demand?

When I first got started, anytime single-family homes were doing well, apartments were suffering because they were losing renters to single-family homes. Today, the demographics have changed so much. There’s a lot of people that aren’t going to buy a single-family home, even if it makes more financial sense to buy them. They don’t want to be tied down, they don’t view it as an easy thing to jump in and out of or they want a more urban lifestyle. (Nearly 70 percent) of households today are not a traditional mom, dad and kids. It’s hugely different than it was 20 years or 30 years ago. And all these young people, they get married so much later today. A lot of women stay single forever now. Another thing that’s really driving demand for apartments, the younger people today all grew up with their own bedroom and bath, so they don’t want a roommate any more. They rather have a small unit. They want to live in a building with all their friends, but when they close their door, they want their own little space.

What’s the status of your Elliston 23 mixed-used building? With all of the investment sales occurring in the Nashville area multifamily market, are you planning to put it on the selling block?

The building won’t even be complete until the end of December, the apartments are about 60 percent leased and the retail portion is fully committed. So leasing has gone pretty well. It was perfect the way Elliston was done because we delivered it into an environment that — there’s one other building in lease up, but not five. (Pine Street Flats was in lease up, but they’re ahead of us and have done well, and Park Central had just started their lease up.) Right now, Ellliston 23 is not on the market. It’s a seller’s market at the moment, so we’re constantly evaluating that. We evaluated whether we wanted to sell it, had different groups come in and tell us what’s it worth. We decided not to put it on the market right now, but we’re definitely considering it in the future. We don’t want to put it on the market too soon. We want to get it leased up and decide when the right timing is. Personally, I’d like to keep it forever. Like Green Hills, we hope to keep it forever. I’d like to keep Elliston 23 if I can. I’m not a short-term hold guy. (Selling) is something my equity partners require me to be, but it isn’t my way of doing things. I’d rather have a nice return over a long period than one little pop and then have to go find some place else.

Are you looking at sites for more projects in Nashville? What are you seeing in terms of price of land?

We’re looking, but in the Midtown area , the pipeline is scaring us. We’re thinking about what might be the next thing to do. Something in the downtown area that’s more affordable, we’re interested in trying to find a place for — where the rents could be $1.50 to $1.60 (a foot). That doesn’t seem affordable, but compared to $2 it is. Land prices are going up so much, it would be hard to do what I told you we want to do because costs are going up. Construction and land prices are sky-rocketing.

What’s the status of Westhaven and how does it reflect your vision for the Green Hills site?It’s about 40 percent built out. It’s been incredibly successful. It exceeded our expectations, even through the recession. We sold 80 houses for $500,000-plus in our slowest year. That’s kind of amazing. Right now, we’re almost on a waiting list for houses there. We’ve sold 100 percent of our inventory. We only put lots online as we see demand. So all the lots we’ve put online are sold. I’m still the developer of Westhaven. There’s about 1,500 lots yet to developed and (Southern Land) and our partners still own most of those. All of our projects are done with investors. We have a waiting line for the next phase (of Westhaven). And all the houses under construction are sold, so we’re trying to get more started.That goes to say that people appreciate mix of uses. One of the things people love about Westhaven is there’s a school on-site, there’s a grocery store, there’s restaurants. The other thing people love and this is important to Green Hills: we’re architects as well as developers. We do all of our own architecture, have our own greenhouses, our own landscape architects. People are really gravitating to more beautiful buildings again, more beautiful houses. It doesn’t have to be as big of a house, but they want it to be beautiful. We’re committed to making that building absolutely a beautiful building in Green Hills and people will appreciate that a lot more than if it was shorter and not very pretty. There will be about 15,000 square feet of retail. There’s a huge demand for more restaurants in Green Hills. People just want more restaurant choices. Even if they don’t want us there, they all want more restaurants and they all have suggestions of what restaurant needs to come. We plan to have a dynamic restaurant environment with outdoor seating.

Tell me at little bit about who is Tim Downey in terms of his passion.

I was born in Chicago, lived in Detroit and I’ve been in Tennessee since 14. I’m 54, so Tennessee is home. Chattanooga felt like home. Sometimes I used to say Chattanooga when headed home. Now I say Nashville. I love architecture. I’m passionate about it and horticulture. They kind of to me go hand-in-hand. I’m very careful, but I really enjoy developing real estate if I can find just the right spot. And if I could I’d keep everything (buildings that he develops) forever and never sell a thing.